Should You Be Fully Positioned in the Junior Resource Space?

Source: Michael Ballanger 07/17/2024

Michael Ballanger of GGM Advisory Inc. shares his thoughts on the junior resource space and some stocks he believes should be on your radar.

As this is being written, the price of gold in spot terms is trading at a new all-time high, with the bellwether ETF SPDR Gold Shares ETF GLD moving to all-time highs above $225.66. Since 2020, my long-range forecast has concentrated on two primary metals — copper and gold — outperforming all other metals for the entire decade of 2020 to 2030. Thus far in 2024, copper has seen a new all-time high back in May when the spot-month contract traded at USD $5.199/lb. Gold hit $2,450.05 around the same time, and after correcting back to just above $2,300 in June, it has been on a near-vertical trajectory since then.

Historically, the TSX Venture Exchange has been the trading venue for the majority of junior Canadian explorers and developers, and over the past fifty years, it has always responded favorably to rising commodity prices but never greater than when gold is in a runaway "bull" phase. It typically moves into "overdrive" when silver kicks into gear and plays leap-frog with gold in daily performance, but the one characteristic that dominates the landscape is volume. Escalating volume is representative of the enthusiasm generated by the underlying commodity price action, and it is during this early phase of advance that the bulk of the larger financings are completed. As the cycle matures, the financing dollars are less, which favors the grass-roots explorers who typically operate on shoestring budgets until the underlying commodity prices top out, at which point everything grinds to a halt.

The current cycle has been an anomaly in that the world has seen a huge uptick in gold and copper, yet there has been literally no escalation in TSXV volume and the coincident financing volumes that are always present. This is due to a number of factors, including competition from the stampeding U.S. technology stocks, whose performance has totally overshadowed the impressive action in copper and gold. Also affecting sentiment for the TSXV has been the Canadian economic scene, where household debt has risen to levels exceeding the U.S. subprime bubble in 2008. There seems to be little, if any, discretionary money allocated for the junior resource space. Lastly, foreign investors have been sour on the Canadian political scene with regard to investment, as the current leadership has been obsessed with climate change, creating a somewhat hostile environment for the mining companies.

Nevertheless, as has always been the case for the TSX Venture Exchange, the movement in metal prices has always resulted in capital movement into that exchange overcoming all odds, including spiraling interest rates in the 1981-1982 bear market that saw shares in International Corona jump 2,000% on their ownership of the Hemlo discovery near Thunder Bay, Ontario. This movement of investment dollars into the junior exploration and development space, while absent since the October 2023 lows, is merely delayed and, in my view, due to arrive on the capital markets' doorstep as summer grinds to a close. This enables investors to put together a shopping list of quality juniors with advanced resources or highly prospective (and largely de-risked) exploration projects in advance of the onslaught of generalist capital into the space.

For this reason, I am issuing this Special Situation Bulletin, providing investors with updates on the companies in my personal portfolio that meet the extensive list of qualifications that the bankers and analysts need prior to engagement. As mentioned earlier, they are all concentrated in the copper and gold space, with a bias toward copper as the top metal for the decade.

Getchell Gold

Getchell Gold Corp. GGLDF: Getchell ("GGLDF") is currently in possession of a 2,059,900 ounce gold deposit in Nevada in a part of the world known for large low-grade gold deposits.

What sets the Fondaway Canyon project apart from others in the region is the higher-then-average grades reported during the 2020-2023 drilling seasons.

What also impresses the investment crowd is the uncanny ability of the exploration team, led by President Mike Sieb, to consistently drill into new zones of gold-bearing mineralization, resulting in the discovery of the previously unknown North Fork and Colorado Southwest zones, which remain open along strike and to depth.

In fact, this entire deposit is wide open to resource enhancement through additional drilling.

The company elected to forego further exploration in 2023 until they completed the $1.6 million final installment of the Fondaway Canyon Property which was no small feat in the final quarter of 2023 as funding for junior explorer/developers was virtually non-existent. However, a strong push in the final weeks of the year, led largely by the strong and loyal shareholder base comprised of high-net-worth individual investors, moved them over the line, and 100% of the asset was secured. However, that depleted any resources allocated for exploration, so the company is currently awaiting the return of the larger financing sources in order to secure drilling funds.

Another reason for curtailing drilling was that until the markets are rewarding junior explorers/developers for positive results, there is no sense in burning away one's treasury expecting a higher stock valuation and additional funding when there are few interested players.

GTCH is primarily a value play. With an indicated and inferred resource of 2,059,900 ounces (and due to report a revised resource estimate next month), the market cap of the company is approximately $20 million. (Assuming future exercise of all options and warrants, the share capital is approaching 200 million, putting an additional $5 million in the treasury.) Using the current indicated and inferred resource as a benchmark, this values the Fondaway asset at $9.90 per ounce, which, for Nevada, is particularly cheap. Furthermore, with an average grade of 1.4 g/t Au, the initial resource has an in situ metal value of in excess of $5 billion. When one considers that the resource is most surely going to grow over the next few seasons of extension drilling, for the entire company to be trading at 0.4% of the gross metal

value is verging on the absurd but in market environments such as the one we are in, undervaluation is just as common as is overvaluation in the artificial intelligence and mega cap tech space.

Using conservative assumptions for Nevada gold deals of $50 ounce, I contend that GTCH should be valued at $100 million or $0.50/share rather than the current $20 million, or $0.097/share. (CA$136 million or CA$0.732/share) That represents a 500% increase in the share price from current levels with greater blue-sky potential through further drilling.

Possible Catalysts

• Joint Venture participation by a senior or intermediate producer looking for presence in Nevada
• Sponsorship by traditional investment bank/corporate finance firm increasing working capital and liquidity
• Migration of the Millennial and Gen-X investor demographics to the gold and silver

Fitzroy Minerals

Fitzroy Minerals Inc. FTZFF: Fitzroy ("FTZFF"), formerly Norseman Silver Ltd., was rebranded in 2023, making the name-change and pivot from silver-copper exploration in B.C., to copper-gold exploration in Chile and Argentina as well as a management change. This pivot has now positioned FTZFF as well as any junior that I have covered in my 45-odd years in the game.

They have acquired a number of highly-prospective assets in both Argentina and Chile, with the recently-announced Buen Retiro project taking center stage as their flagship asset. It is seen as a large, underexplored, iron-oxide-copper-gold ("IOCG") deposit that carries the potential to be on a scale similar to the Candelaria Mine 40 km. to the NW owned by the Lundin Mining Group. (Forward guidance from Lundin has the mine producing 160,000-170,000 tonnes of copper and 100,000-110,000 ounces of gold in 2024.)

The northern part of the Buen Retiro deposit is known to be IOCG-style with an oxide cap carrying economically viable grades of copper-gold mineralization. The southern part is a different type of mineralization but nonetheless carries similar grades in the oxides, allowing for a considerable estimate of the scale to be present. The key to this project, in my view, lies in the exploration results of drill intercepts containing the mineralization beneath the oxide cap, as shown in the diagram on the next page.

From the standpoint of de-risking, the presence of the oxide cap and the existence of such pervasive copper-gold mineralization throughout the property significantly enhances the likelihood of economic viability for Buen Retiro but it is the exploration upside that has me

spinning. In an interview, I watched with former Vale country manager and 35-year veteran of the Chilean mining scene, Gilberto Schubert, he described the "suite of rocks" as "mega-breccias including Candelaria-style sulfides," which is quite a statement from a gentleman with his credentials (including a Masters of Mineral Economics).

Without elaborating much further, Buen Retiro is the kind of project that makes billionaires out of millionaires and a potential life-changing event for those that participate.

Also included in the Chilean asset portfolio is the Caballos Copper Project, which is located in the Valparaiso Mining District, surrounded by majors such as Freeport-McMoRan, Newmont, Codelco, and Los Andes, where a 1,000-by-2,000 meter zone of elevated copper-gold mineralization has been identified by way of surface sampling and trenching. This was formerly the #1 priority for the 2024 drilling season and is a highly prospective project. The last Chilean project is the Polimet Property where historical small-scale production with noted grades of in excess of 1.5% Cu and 1.0/g.t Au before shutting down.

There has never been any modern systematic drilling conducted on Polimet, which is the precise intention for FTZFF. The final project has my undivided attention, although it is very "early days" and represents a massive undertaking for a junior like FTZFF. Named the Taquetren Gold Project, it is located in the southern Patagonia region of Argentina in a geological setting known as the Gastre Fault, where known mineral deposits have been discovered. The Taquetren story revolves solely around project boss Daniel Bussandri, whose prospecting and geological wizardry are well-known to all who have followed the history of the gargantuan Navidad Silver-Lead discovery of 2002 that led to its sale to Pan American Silver in 2009 for over $600 million. Mr. Bussandri has identified a gold-bearing zone at Taquetren that has secured his interest, and while it is far too early to call it a discovery, the fact that it has his interest cannot ignored. (He tends to hunt "elephants" rather than "rabbits".)

Once the FTZFF acquisition of Buen Retiro is completed, there will be approximately 176 million shares issued carrying a market cap of CA$35.2 million, which I contend is roughly one-third of the cap of listed peers with flagship assets similar in scale and grade to Buen Retiro alone. The Chilean property package will see FTZFF allocating most of its resources to its flagship but continuing to advance all projects by way of joint venture or spin-out. I see the Taquetren project as an ideal spin-out as a wholly Argentinian venture with the view that political changes are paving the way for accelerated foreign investment and liberated mining laws.

A "Must-Own" Junior: Vortex Metals

Vortex Metals Inc. VMSSF: Vortex ("VMSSF") is another copper-gold exploration story with a first-rate management team in Chairman Michael Williams and Vikas Ranjan.

Having just completed a CA$1.7 million funding, the company is poised to drill the Illapel Copper Property commencing in August.

In a program headed by former BHP-Billiton country manager John Larson, the drill targets are all located north and south of and along strike from the Rio-27 copper mine located adjacent to the property.

Geochemical surveys revealing copper oxides at surface have significantly increased the likelihood of a series of Rio-27-style intercepts and given that the Rio-27 has been classified as having 6.2 million tonnes of contained copper, that is very good company to keep.

While Illapel is the flagship project for 2024, they also own 100% interest in two very interesting volcanogenic massive sulfide ("VMS") targets in Oaxaca, Mexico, identified by the late David

Jones, a geologist considered an expert in dealing with collapsed calderas (volcanic craters) the likes of which is the location of the Zaachila and Riqueza Marina targets which had to be mothballed due to permitting problems with the local communities. I spent considerable time discussing Riqueza Marina with David a few years back before he passed and was thoroughly impressed with the setup. He had identified a rhyolite dome that was sitting on top of an enormous IP and gravity anomaly with all of the required indicator or pathfinder minerals present. Rock analysis reduced the likelihood of a large pyrite deposit, but the rhyolite caught my attention.

One of the things I learned forty years ago about VMS deposits occurred while I was discussing the Kidd Creek Mine in Timmins, Ontario, with an old, grizzled hard rock miner who grew up in the region and knew all that is to know about the "mill rock" that you could stand on at the flanks of the current open pit. He told me that it was the presence of rhyolite and andesite that geologists sought out in their hunt for VMS deposits, known around the globe as the richest base metal occurrences in nature. In fact, geologists I have known over the years confirmed that the exploration that led to the discovery of the Bathurst Mine in New Brunswick used those indicator minerals as trackers. Needless to say, VMS has a very strong backup portfolio for the Illapel project.

The base case for investing in VMSSF lies in the team. Recently appointed to the Board of Directors was Paul Fürst, a director of Banco Chile, the largest financial institution in the country, and a prominent member of the Chilean mining community by way of one of the family businesses providing services to the Andean miners. Chairman and Co-Founder Michael Williams is familiar to many followers as the Founder and Chairman of Aftermath Silver, which moved from $0.08 in mid-2019 to $1.70 by January 2021 despite enduring the panic of the 2020 flu scare and resource stock crash.

John Larson carries over forty years of experience in the mining field, most of it in Chile, with 15 of it spent as country manager for BHP. Vikas Ranjan has over 25 years of experience in diverse areas of finance, capital markets, entrepreneurship, and investing. He is a co-founder of the Gravitas Group of companies, and his experience encompasses working in senior executive roles in both Canada and India. Mr. Ranjan has been involved in launching several public and private enterprises in the areas of capital markets and growth investing.

At a current market cap of $5.75 million, it must be known that the first time I invested with Michael Williams was in 2008 in a Yukon explorer called Underworld Resources at around the same market cap. Within eighteen months, it was sold to Kinross for $140 million, making it a 20-bagger from the get-go. Aftermath Silver in 2019 had a similar ROI. Mr. Williams has an extensive network of investors, and once he has a company with promotable results, the shares always do well. If John Larson delivers Rio- 27-style results, VMS stands a good chance of being another USD $100 million market cap (as in another 20-bagger).

This is my "dark horse" position for 2024.

American Eagle Gold

One of my top selections for 2024, American Eagle Gold Corp. AMEGF ("AMEGF"), is currently drilling the B.C.-based NAK project where results announced in the early part of the year resulted in a big share price advance and a strategic entry of Teck Resources Ltd. TCKRF by way of a 15.02% injection into the AMEGF treasury.

With legendary copper porphyry expert and geologist Charlie Greig as project consultant, the results have been extremely positive, and the stock has reflected those results, having advanced from under a dime in March 2023 to a recent 52-week high at $0.83.

With a market cap of $70 million, the best comparison I can find is with Hercules Metals, which has a discovery in Idaho that is not nearly as impressive as the NAK discovery but carries a market cap of $122 million.

Having located economically viable copper-gold mineralization in two separate zones, the 2024 drill program is attempting to connect the two zones.

This will obviously add significant scale to the project.

They are also drilling a couple of deeper holes to confirm the presence of the heat engine that was the source of all the copper-gold found close to surface.

Also adding to the intrigue is a third gold-centric zone being investigated.

This is interesting, given the dearth of gold projects in this part of B.C.

NAK is a serious discovery with an even greater degree of upside potential than the 10-bagger it has already been since early 2023.

If the 2024 drilling season proves out their model, I do not believe AMEGF will be around to enjoy the fruits of drilling out a multi-billion tonne resource.

I think that the mighty Teck will step up and issue cash and shares of their near-to-all-time high stock to acquire , lock, stock, and barrel before the end of the 2024 drilling season.

With the predominantly retail ownership base, I think the company could be snatched up for $200 million in cash and paper.

This would still be a 3-bagger from here.

And with copper and gold prices at record levels, it makes perfect sense to expect it.

Drill results are expected to begin to trickle in by the beginning of August, with visual observation of the early lithology resembling the results of last year (i.e., "strongly mineralized").

AE is a "Strong Buy."

Tisdale Clean Energy

Tisdale Clean Energy Corp. TCEFF: Tisdale ("TCEFF") is a uranium exploration company with properties in the Athabasca Basin of central Saskatchewan (Canada).

The South Falcon East project was drilled back in March, with results reported in early April that were less than thrilling.

After completing a financing at CA$0.18 in early 2024, this selection has been less than robust but remains on the list as my only proxy for uranium ownership, having exited my other holdings when uranium prices gapped up through $100/lb. in early 2024.

I have endeavored to own other uranium names in the past as a way of maintaining exposure to the group because there is little doubt that demand for uranium is going to skyrocket before the end of the decade.

There are simply too many nuclear reactors under construction around the planet for uranium prices to remain static. Since TCEFF has a resource, albeit small, established at South Falcon East, it will surely attract additional work and market attention once U308 prices move back above $100/lb., which they will.

With a market cap of slightly below $2 million, this is a very cheap call option on the uranium space and ultimate recovery in the uranium juniors.

The Junior Resource Space

The GGM Advisory was founded in 2020 after I spent the better part of 40 years acting as an incubator for junior mining clients. From grassroots exploration companies to advanced developers, I spent the better part of forty years funding and advising these promises of wealth, with some enjoying wild success (Hemlo juniors 1981, Eskay Creek 1988, Diamond Rush 1991- 1997, Voisey's Bay 1993) while others crashed and burned on the tarmac.

What I learned over the years is that the one fatal flaw in all junior explorers and developers is failing to manage their burn rate, resulting in being underfunded. I try to work with issuers that will never allow the working capital position to drop below CA$1 million, and when it does, I am on the phone telling them to "do a raise, NOW."

The current market environment is normally quiet during the months of May and September and particularly quiet in July and August as most investors (and bankers) are away on holiday. This year, it has still been deathly for reasons mentioned earlier. Volumes were already in severe decline going into May, so the current period has been and may continue to be challenged until gold prices break out above $2,500, triggering a broad commodity price advance that will force generalist portfolio managers "over the wall" and finally into the world of precious and base metal investing.

For this reason, it is imperative to be fully positioned in the junior resource sector with particular emphasis on companies (such as GTCH) that have large, underappreciated resources (or targets) in favorable jurisdictions that have demonstrated the ability to raise money in challenging environments such as this.

For many, the wait has been long, but the events of earlier this week, with gold shattering its May record high at $2,544, may prove to be the cannon blast that announces the arrival of the bull market in commodities.

We shall see. . .

Important Disclosures:

1. Tisdale Clean Energy Corp. is a billboard sponsor of Streetwise Reports and pays SWR a monthly sponsorship fee between US$4,000 and US$5,000. In addition, Tisdale Clean Energy Corp. has a consulting relationship with an affiliate of Streetwise Reports, and pays a monthly consulting fee between US$8,000 and US$20,000.
2. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of Getchell Gold Corp., Fitzroy Minerals Inc., Vortex Metals Inc., American Eagle Gold Corp., and Tisdale Clean Energy Corp.
3. Michael Ballanger: I, or members of my immediate household or family, own securities of: All. My company has a financial relationship with Fitzroy Minerals Inc. I determined which companies would be included in this article based on my research and understanding of the sector.
4. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
5. This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

Michael Ballanger Disclosures

This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.